the fashion channel - a case analysis
TRANSCRIPT
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Presented byDevanandLavanyaSrivatsSurya
Uthra RavichandranYamini
Yogeshwaran
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Case Analysis
• Dana Wheeler, Senior VP of marketing for TFC has developed three strategies to mark her
presentation to the company’s leaders.
• The Co. needed to strengthen its competitive position and would be raising $15Mn over
2006 spending of $45Mn for advertising, promotion and public relations.
• Widely available niche networks reaching 80Mn US HH.
• Most avid viewers – women of age 35-54
• Popular series “Look great on Saturday Night Under $100”
• No detailed segmentation, positioning or branding strategy
• Lifetime and CNN had launched specific fashion programs whose ratings were higher than
that of TFC.
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Position of TFC More no. of viewers
Lesser no. of viewers
Fashion audience
Nonspecific audience
TFC
Lifetime
CNN
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Sources of Revenue Advertising revenue
$230.6 Mn for the year 2006
6 mins of ad time for every half and hour, 24 hrs per day for a total 2016 mins per week
Price was expressed in CPM for which an advertiser would pay.
Cable affiliate revenue
$80Mn for the year 2006
Positioned as basic channel hence available for basic cable services
MSO would sign multi year contracts with the network
Subscriber fee averaged $1 per subscriber per year
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Alpha research studyTFC CNN Lifetime
Consumer interest 3.8 4.3 4.5
Awareness 4.1 4.6 4.5
Perceived value 3.7 4.1 4.4
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Problems of TFC
• Rivalry in the market – fashion programs by CNN and Lifetime
• The average rating for consumer interest, awareness and perceived value is much
lesser than that of CNN and Lifetime.
• No targeting strategy – with 24/7 only fashion channel they survived.
• Decrease of revenue from cable affiliates and advertisers
• TFC needs more than just its “Always on, fashion for everyone” strategy to retain its
desired position.
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Objectives of TFC
• Improve their average rating compared to similar programming on CNN and Lifetime.
(Increase viewership ratings)
• If The Fashion Channel wants to increase advertising revenue, they must find a way to
enter into the certain premium CPM groups. (Increase advertising pricing)
• Segment and target the female audiences who were of 18-34 years of age.
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Demographic and Attitudinal cluster data analysis For scenario 1:
• Broad multicast strategy – cross segment of fashionistas, planners & shoppers
and situationalists. Women aged between 18 to 34 is more .
• Total TV households = 110 million
• Fashionistas = 15% i.e., 16.5 million TV households
• Planners & shoppers = 35% i.e., 38.5 million TV households
• Situationalists = 30% i.e., 33 million TV households.
• Therefore there are totally 88 million TV households in this category.
• Fashionistas- 140 > 100, planners & shoppers- 110>100, situationalists-
105>100.
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For scenario 2• Multi-segment approach- focus more on fashionistas. It was highly valued 18 to 34
female demographic.
• Here , there is only 16.5 million TV households.
• Here only fashionistas i.e., 140>100
For scenario 3• Dual targeting- fashionistas and shoppers & planners.
• 55 million TV households
• Fashionistas- 140 > 100, planners & shoppers- 110>100
Uses:
• TFC generally scored above the midpoint and these data suggested it was lagging
two key networks that were offering competitive programming
• It also helped to design the strategies based on the size of cluster and the index.
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Criteria to evaluate targeting options
Cross segment Multi-segment Dual segment
Rating 1.2 0.8 1.2
CPM $1.8 $3.5 $2.5
Promotion cost Same as current year
$15Mn $20Mn
Demographic (18-34 W)
Present in all three
Higher number Mediocre population of viewers
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PROS CONS
Strategy 1 – Crossover segmentation
Fashionistas+
Planners & Shoppers+
Situationalists
i. Boost ratings to 20% (1.0 to 1.2)ii. No additional promotional
expenseiii. Size of the cluster 80%iv. Margin 29%
I. CPM is same as predicted for 2007 - $1.80
II. This type of segment approach may eventually fail
III. CPM decrease
Strategy 2 – Multi segmentation
“FASHIONISTAS”
i. Strong in highly valued 18-34 female demographic
ii. Strengthen the value of audience to advertisers
iii. High increase in CPM $3.5iv. Margin 37%
I. Covers only 15% of householdsII. Rating drops to 0.8III. Additional programming cost
of $15MnIV. Size of the cluster 15%
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PROS CONS
Strategy 3 – Dual targeting
Fashionistas
+
Shoppers/Planners
i. Rating would increase to 1.2ii. Increase in CPM to $2.50iii. Balance on two segmentsiv. Margin 39%v. Size of the cluster 50%
I. Incremental expense for promotion - $20Mn
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Ad Revenue Calculator
Current 2007 Base Scenario 1 Scenario 2 Scenario 3
TV HH 110,000,000 110,000,000 110,000,000 110,000,000 110,000,000
Average Rating 1.0% 1.00% 1.2% 0.8% 1.2%
Average Viewers (Thousand) 1100 1,100 1,320 880 1,320
Average CPM $2.00 $1.80 $1.80 $3.50 $2.50
Average Revenue/Ad Minute $2,200 $1,980 $2,376 $3,080 $3,300
Ad Minutes/Week 2016 2016 2016 2016 2016
Weeks/Year 52 52 52 52 52
Ad Revenue/Year $230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600 Incremental Programming
Expense $15,000,000 $20,000,000
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2006 Actual 2007 Base Scenario 1 Scenario 2 Scenario 3
Financials
Revenue
Ad Sales $230,630,400 $207,567,360 $249,080,832 $322,822,560 $345,945,600
Affiliate Fees $80,000,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000
Total Revenue $310,630,400 $289,167,360 $330,680,832 $404,422,560 $427,545,600
Expenses
Cost of Operations $70,000,000 $72,100,000 $72,100,000 $72,100,000 $72,100,000
Cost of Programming $55,000,000 $55,000,000 $55,000,000 70,000,000 $75,000,000
Ad Sales Commissions $6,918,912 $6,227,021 $7,472,425 $9,684,677 $10,378,368
Marketing & Advertising $45,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000
SGA $40,000,000 $41,200,000 $41,200,000 $41,200,000 $41,200,000
Total Expense $216,918,912 $234,527,021 $235,772,425 $252,984,677 $258,678,368
Net Income $93,711,488 $54,640,339 $94,908,407 $151,437,883 $168,867,232
Margin 30% 19% 29% 37% 39%
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Financial analysis for 2006 and forecasted 2007
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
Ad Sales Total Revenue Net Income
2006 2007
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Most suitable option:
• After analyzing the case and its financial implications and pros and cons of applying each of the strategies, we
think that TFC should apply strategy 3, a dual segmentation of Fashionistas and Shoppers/Planners.
• This strategy acquires half of the females of age group 18-34
• It gives a greatest margin of 39% and a net income higher than the other two plans
• Not concentrating on only one segment and also helps viewers to buy the fashion they need; also tells us where
to buy and what to buy.
• This will increase the awareness among the people and keeps up a healthy competition vs. CNN and lifetime
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